Rice prices to shoot up due to welfare schemes and fall in output

Global exporters may exploit India’s situation and take prices up

GN Bureau | November 16, 2015

The consequences of deficient 2015 monsoon are likely to be far-reaching and the government has been advised to wake up to frame policies. According to a report by industry body Assocham, after pulses, rice prices may shoot up in the coming months due to stocks going for welfare schemes and a likely fall in its kharif output.

Highlighting the urgent need for a close monitoring of food prices, the study has cautioned that prices of rice may shoot up reach a boiling point as the stock of the key staple cereal is depleting fast owing to deficient rains and fall in output. Given the huge domestic demand for rice, government needs to closely monitor both prices and stock situation. Already a section of global exporting community is evaluating possibility of India entering international market for import of these commodities from 2017, if urgent steps are not taken to augment supplies.

Kharif rice production is estimated at 90.61 million tonnes in 2015-16 crop year, according to government estimates. The monthly rice requirement is estimated between 8.5 to 9 MMT whereas yearly requirement is close to 108 MMT.

“Increasing export outgo on account of PDS (Public Distribution System) and other welfare schemes will continue to weigh on availability in the open market. Unless government is able to handle the situation prudently, depleting stocks will soon reflect on the open market prices”, adds the study.

"...this is unlikely to be achieved due to severe deficit rains in Punjab, Haryana, Uttar Pradesh, Bihar, Maharashtra and Karnataka and the best that could be achieved is 89 million tonnes," it said.

It also said that overall rice output may be around 103 million tonnes during 2015-16.

That apart, the report said rice stocks have declined in last three years from 24.59 million tonnes in 2012 to 13.89 million tonnes (plus unlimited paddy 3.61 tonnes) in stocks at present.

"Increasing export outgo on account of PDS (Public Distribution System) and other welfare schemes will continue to weigh on availability in the open market. Unless government is able to handle the situation prudently, depleting stocks will soon reflect on the open market prices", the report added.

ASSOCHAM suggest that DSR (Direct Seeded Rice) should be encouraged to conserve water. Presently, less than 10% of paddy production is under DSR due to limitations in the availability of suitable equipment for DSR in clay soils. Urgent attention is needed in this regard to expand DSR acreage on war footing.

Given the drop in kharif 2015 foodgrain production and mere 252.68 MMT for 2014-15 against record 265 MMT for 2013-14 foodgrain production, it is highly doubtful if India could reach 250 MMT for 2015-16, which is ominous.

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